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Phillips 66 (PSX - Free Report) is aZack Rank #1 (Strong Buy) thatis a diversified and integrated energy company.
Shares are trading near the 52-week high, and the estimate revisions are rolling in since the company's second-quarter report showed a business that's still gaining momentum.
About the Company
Phillips 66 is an integrated downstream energy provider with operations spanning Midstream, Chemicals, Refining, Marketing and Specialties, and Renewable Fuels.
Refining remains the core of the business: the company runs 13 refineries, most of them in the United States, with combined capacity of roughly 2.2 million barrels per day. This makes PSX one of the largest refiners in the world.
That scale is paired with meaningful diversification. The midstream and chemicals exposure has increasingly become part of the bull case and has given the company a sturdier earnings base than pure-play refiners.
The company is valued at $100 billion and has a forward PE of 11. The stock has Zacks Style Scores of "B" in Value, "A" in Growth, and "C" in Momentum.
A Blowout Quarter
The headline number from the early August report was adjusted earnings of $9.41 per share against a Street estimate of $7.68, a beat of nearly 23%. Adjusted EBITDA came in at $5.89 billion versus $1.23 billion in the first quarter, and crude capacity utilization improved to 96%.
On the call, the CEO credited the quarter to strong operations and the strength of the integrated portfolio, with refining benefiting from wider market crack spreads and favorable mark-to-market impacts while midstream, chemicals, marketing and specialties, and renewable fuels all chipped in. The board backed that up by authorizing an additional $10 billion in share buybacks, roughly 11% of the company's market cap.
Phillips 66 is also reportedly exploring, alongside Shell, a sale of their stakes in the Explorer Pipeline, a deal that press reports have pegged near a $3.5 billion valuation. Energy Transfer and MPLX could reportedly join the sale process depending on the level of interest. Any transaction would add another lever for debt reduction on top of the balance sheet progress already underway.
Balance Sheet and Guidance
Management expects year-end net debt below $16 billion and believes it can hit its longer-term $17 billion total-debt target ahead of the original 2027 deadline, with a subsequent goal of $13.5 to $14 billion in net debt. The company plans to return more than half of operating cash flow, excluding working capital, to shareholders in the back half of the year.
For the third quarter, guidance calls for refining crude utilization in the mid-90% range, chemicals utilization in the low 90s, turnaround expense of $100 million to $120 million, and corporate costs of $325 million to $350 million.
Management pointed to roughly 7 million barrels per day of offline Asian and Middle Eastern refining capacity and 1.4 million barrels per day still out in Russia, alongside low global inventories. Those supply gaps are why the company believes the current refining margin strength could persist through 2027 rather than fade quickly the way the 2022 spike did.
Analyst Estimates Are Soaring
The estimate revision trend backs up the optimism from the call. Over just the past 60 days, the current-year consensus EPS estimate has jumped from $18.23 to $24.07, or 32%. Next-year estimates have climbed from $18.47 to $22.12, a still steady jump of 19%
All of the revisions over both the last 30 and 60 days have gone in one direction: up. That kind of one-sided agreement among analysts, combined with the magnitude of the increases, is a setup that tends to precede continued outperformance.
Sell-side price targets have followed suit. UBS reiterated its Buy rating and raised its target to $300 from $235, TD Cowen reiterated Buy at $255, and Evercore ISI bumped its Outperform target to $220 from $200. Wells Fargo raised its target to $335 from $239 while maintaining an Overweight rating.
Not every desk is fully on board with the valuation, however: Piper Sandler lifted its target to $264 but kept a Neutral rating, and Barclays nudged its target to $216 while staying at Equal Weight. This is a reminder that the stock's sharp run has some analysts more focused on price than on the underlying earnings trend.
The chart looks more like a tech stock than an energy name, but considering what we talked about above, the move to the upside continues. The stock could be due for a pullback, but these should be viewed as opportunities.
Let’s take a look at possible entry points for those that don’t like buying all-time highs:
21-Day Moving Average (MA): $241
50-Day MA: $216
200-Day MA: $172
Fibonacci retracement (June lows to Highs): $201(61.8%)-$212 (50% retrace)
PSX moves in lockstep with oil, so as long as the current geopolitical climate stays volatile, it will be hard to get a solid entry. Investors interested in the stock must watch the price action closely and pounce on any buy the dip opportunity that comes.
In Summary
The Phillips 66 chart is starting to make some tech bulls jealous. The stocks outperformance and strong fundamentals continue to attract new investors and as long as oil stays elevated, the momentum should continue.
A record quarter, a Zacks Rank #1, and an estimate revision trend that's still accelerating gives the move real fundamental backing rather than just hype. Add in an aggressive buyback authorization, accelerated debt paydown, and a potential Explorer Pipeline sale still to be priced in, and there's a case for more room to run.
View the Zacks #1 Rank List
Bull of the Day: Phillips 66 (PSX)
Phillips 66 (PSX - Free Report) is a Zack Rank #1 (Strong Buy) that is a diversified and integrated energy company.
Shares are trading near the 52-week high, and the estimate revisions are rolling in since the company's second-quarter report showed a business that's still gaining momentum.
About the Company
Phillips 66 is an integrated downstream energy provider with operations spanning Midstream, Chemicals, Refining, Marketing and Specialties, and Renewable Fuels.
Refining remains the core of the business: the company runs 13 refineries, most of them in the United States, with combined capacity of roughly 2.2 million barrels per day. This makes PSX one of the largest refiners in the world.
That scale is paired with meaningful diversification. The midstream and chemicals exposure has increasingly become part of the bull case and has given the company a sturdier earnings base than pure-play refiners.
The company is valued at $100 billion and has a forward PE of 11. The stock has Zacks Style Scores of "B" in Value, "A" in Growth, and "C" in Momentum.
A Blowout Quarter
The headline number from the early August report was adjusted earnings of $9.41 per share against a Street estimate of $7.68, a beat of nearly 23%. Adjusted EBITDA came in at $5.89 billion versus $1.23 billion in the first quarter, and crude capacity utilization improved to 96%.
On the call, the CEO credited the quarter to strong operations and the strength of the integrated portfolio, with refining benefiting from wider market crack spreads and favorable mark-to-market impacts while midstream, chemicals, marketing and specialties, and renewable fuels all chipped in. The board backed that up by authorizing an additional $10 billion in share buybacks, roughly 11% of the company's market cap.
Phillips 66 is also reportedly exploring, alongside Shell, a sale of their stakes in the Explorer Pipeline, a deal that press reports have pegged near a $3.5 billion valuation. Energy Transfer and MPLX could reportedly join the sale process depending on the level of interest. Any transaction would add another lever for debt reduction on top of the balance sheet progress already underway.
Balance Sheet and Guidance
Management expects year-end net debt below $16 billion and believes it can hit its longer-term $17 billion total-debt target ahead of the original 2027 deadline, with a subsequent goal of $13.5 to $14 billion in net debt. The company plans to return more than half of operating cash flow, excluding working capital, to shareholders in the back half of the year.
For the third quarter, guidance calls for refining crude utilization in the mid-90% range, chemicals utilization in the low 90s, turnaround expense of $100 million to $120 million, and corporate costs of $325 million to $350 million.
Management pointed to roughly 7 million barrels per day of offline Asian and Middle Eastern refining capacity and 1.4 million barrels per day still out in Russia, alongside low global inventories. Those supply gaps are why the company believes the current refining margin strength could persist through 2027 rather than fade quickly the way the 2022 spike did.
Analyst Estimates Are Soaring
The estimate revision trend backs up the optimism from the call. Over just the past 60 days, the current-year consensus EPS estimate has jumped from $18.23 to $24.07, or 32%. Next-year estimates have climbed from $18.47 to $22.12, a still steady jump of 19%
All of the revisions over both the last 30 and 60 days have gone in one direction: up. That kind of one-sided agreement among analysts, combined with the magnitude of the increases, is a setup that tends to precede continued outperformance.
Sell-side price targets have followed suit. UBS reiterated its Buy rating and raised its target to $300 from $235, TD Cowen reiterated Buy at $255, and Evercore ISI bumped its Outperform target to $220 from $200. Wells Fargo raised its target to $335 from $239 while maintaining an Overweight rating.
Not every desk is fully on board with the valuation, however: Piper Sandler lifted its target to $264 but kept a Neutral rating, and Barclays nudged its target to $216 while staying at Equal Weight. This is a reminder that the stock's sharp run has some analysts more focused on price than on the underlying earnings trend.
Phillips 66 Price, Consensus and EPS Surprise
Phillips 66 price-consensus-eps-surprise-chart | Phillips 66 Quote
The Technical Take
The chart looks more like a tech stock than an energy name, but considering what we talked about above, the move to the upside continues. The stock could be due for a pullback, but these should be viewed as opportunities.
Let’s take a look at possible entry points for those that don’t like buying all-time highs:
21-Day Moving Average (MA): $241
50-Day MA: $216
200-Day MA: $172
Fibonacci retracement (June lows to Highs): $201(61.8%)-$212 (50% retrace)
PSX moves in lockstep with oil, so as long as the current geopolitical climate stays volatile, it will be hard to get a solid entry. Investors interested in the stock must watch the price action closely and pounce on any buy the dip opportunity that comes.
In Summary
The Phillips 66 chart is starting to make some tech bulls jealous. The stocks outperformance and strong fundamentals continue to attract new investors and as long as oil stays elevated, the momentum should continue.
A record quarter, a Zacks Rank #1, and an estimate revision trend that's still accelerating gives the move real fundamental backing rather than just hype. Add in an aggressive buyback authorization, accelerated debt paydown, and a potential Explorer Pipeline sale still to be priced in, and there's a case for more room to run.